“Currently, there is strong demand for soybean meal from the livestock industry, but there is no certainty on whether Wilmar would be able to pass on any additional cost to customers,” RHB said.

It noted that China buys 96.5 million tonnes of soybeans a year, accounting for 63 percent of world demand, with about 40 percent of its imports coming from the U.S. and the rest from South America. Wilmar is China’s second-largest oilseeds crusher and the proposed 25 percent soybean tariff would increase costs, it noted.

“We think it is almost impossible to entirely replace the imports from the U.S. with other crops,” it said. “Theoretically, China could seek alternative suppliers from Brazil and Argentina, or import more of other oilseeds. However, we believe this move would have a knock-on effect, raising South American soybean prices as well as the prices of other oilseeds.”

But RHB kept a Buy call on Wilmar with a S$3.45 target price.

It noted that the share price declines on the potential soybean tariff have made the stock “fairly attractive.” Additionally, the trade issues have also sent soybean prices sharply lower and Wilmar could benefit from the short-term decline, it said.